We recently compiled a list of the Warren Buffett Dividend Stocks by Sectors and Industries. In this article, we are going to take a look at where Visa Inc. (NYSE:V) stands against the other Warren Buffet-approved dividend stocks.
Warren Buffett is a well-known figure in the investment community, and his reputation requires no introduction. He is one of those rare investors whose strategies are closely emulated by countless newcomers to the field. This widespread admiration stems from the fact that Buffett operates in a class of his own. He remains committed to the investment principles he has relied on throughout his career, particularly value investing. The Oracle of Omaha’s lack of enthusiasm for the current AI trend highlights his steadfast dedication to the strategies that have guided his investment approach for decades.
At the Berkshire annual shareholder meeting in May, Buffett was asked about AI’s potential impact on traditional industries. He responded by acknowledging that he was not knowledgeable about the technology but emphasized that this lack of understanding did not imply he dismissed its existence, importance, or significance in any way. That said, Buffett is also enthusiastic about several other strategies beyond value investing.
Also read: Warren Buffett Disciple Guy Spier’s 10 High Conviction Stock Picks
Dividend stocks have been a staple in Berkshire’s portfolio for a long time, with nearly 93% of the holdings focused on them. The media has often highlighted Buffett’s affinity for dividend stocks, particularly because Berkshire Hathaway, his own company, does not pay a dividend. His approach has proven successful, as the investment portfolio managed by Buffett and his team is projected to generate around $6 billion in annual dividend income. Remarkably, $4.36 billion of that income from common and preferred stock dividends comes from just five companies.
Buffett’s approach to dividend investing isn’t driven by chasing the highest yield. Instead, he prioritizes identifying outstanding companies that can maintain and grow their dividends over the long term. He prefers a moderate yield from a stable, successful company over a higher yield from a less reliable and weaker one. If Warren Buffett has a preference for dividends, it’s clear he’s on the right track, given how significantly these stocks have contributed to overall market returns. His love for dividend stocks reflects the significant role these equities have played in contributing to the market’s overall returns over the years. Between 1993 and the end of 2022, the S&P 500 grew by 777%. However, when dividends were factored in, the S&P 500 saw an increase of over 1,400% during the same period. This indicates that dividends accounted for more than 20% of the market’s total return during those years.
Buffett carefully monitors the sectors and industries he invests in, which is a core aspect of his investment strategy. By the end of Q2 2024, the finance sector was the largest portion of his portfolio, followed closely by technology, with substantial investments also in basic materials and consumer goods. This article will explore some of the best Warren Buffett dividend stock selections across these different sectors and industries.
Our Methodology:
For this article, we analyzed Berkshire Hathaway’s 13F portfolio as of the second quarter of 2024 and picked dividend stocks from the portfolio. We mentioned the sectors and industries these stocks belong to and ranked them in ascending order of the hedge fund’s stake in them during Q2 2024.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of a modern payments terminal with a pile of credit cards on the side.
Visa Inc. (NYSE:V)
Berkshire Hathaway’s Stake Value: $2,177,834,326
Sector: Financials
Industry: Credit Services
An American credit card service corporation, Visa Inc. (NYSE:V) ranks twelfth on our list of the best Warren Buffett dividend stocks. The company manages a credit card network that facilitates the transfer of funds from customers to merchants. It collaborates with financial institutions that handle the credit aspect of transactions conducted through its channels. Despite the challenges posed by rising inflation in recent years, Visa Inc. (NYSE:V) has shown resilience. The company has also developed new segments that are growing more rapidly than its traditional business, and although these segments are still smaller, they are helping to offset some of the pressures on the overall business. The stock has surged by over 396% over the past 10 years, outperforming the broader market, which returned 183% during this period.
In fiscal Q3 2024, Visa Inc. (NYSE:V) reported revenue of $8.9 billion, which showed a 10% growth from the same period last year. The company’s key business metrics remained stable, with a 7% increase in payments volume, a 14% rise in cross-border volume, and a 10% growth in processed transactions. During the quarter, the company also strengthened its partnerships with clients globally and introduced several new innovations aimed at shaping the future of commerce.
Aoris Investment Management also highlighted strengths in Visa Inc. (NYSE:V)’s operations in its Q2 2024 investor letter. Here is what the firm has to say:
“Visa Inc. (NYSE:V) operates the world’s largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers…” (Click here to read the full text)
On July 23, Visa Inc. (NYSE:V) declared a quarterly dividend of $0.52 per share, which was in line with its previous dividend. Overall, the company has been raising its payouts for 15 consecutive years, which makes V one of the best Warren Buffett dividend stocks. In fiscal Q3 2024, the company returned $5.8 billion to shareholders through dividends and share repurchases.
As of the close of Q2 2024, 163 hedge funds held stakes in Visa Inc. (NYSE:V), compared with 166 in the previous quarter, as per Insider Monkey’s database. These stakes are worth nearly $25 billion in total. With over 16.7 million shares, TCI Fund Management was the company’s leading stakeholder in Q2.
Overall V ranks 12th on our list of the best dividend stocks to buy according to Warren Buffett. While we acknowledge the potential of V as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than V but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
